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Section 1: 8-K (8-K)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________________
FORM 8-K
_____________________________________________
CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) February 3, 2019
_____________________________________________
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(Exact name of registrant as specified in its charter)
_____________________________________________
 
MARYLAND
 
1-13232
 
84-1259577
(State or other jurisdiction
 
(Commission
 
(I.R.S. Employer
of incorporation or organization)
 
File Number)
 
Identification No.)
4582 SOUTH ULSTER STREET
SUITE 1100, DENVER, CO 80237
_____________________________________________
(Address of principal executive offices)
  
(Zip Code)
 
Registrant’s telephone number, including area code: (303) 757-8101

NOT APPLICABLE
 (Former name or Former Address, if Changed Since Last Report)
_____________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the exchange act. o








ITEM 2.02.    Results of Operations and Financial Condition.
The earnings release of Apartment Investment and Management Company (“Aimco”), dated February 4, 2019, attached hereto as Exhibit 99.1 is furnished herewith. Aimco will hold its fourth quarter 2018 earnings conference call on February 5, 2019, at 1:00 p.m. Eastern time. You may join the conference call through an internet webcast accessed through Aimco’s website at investors.aimco.com. Alternatively, you may join the conference call by telephone by dialing 888-317-6003, or 412-317-6061 for international callers, and using passcode 3725757. If you wish to participate, please call approximately five minutes before the conference call is scheduled to begin.
If you are unable to join the live conference call, you may access the replay until May 6, 2019, by dialing 877-344-7529, or 412-317-0088 for international callers, and using passcode 10127088, or you may access the audiocast replay on Aimco’s website at investors.aimco.com. Please note that the full text of the earnings release and supplemental schedules are available through Aimco’s website at investors.aimco.com. The information contained on Aimco’s website is not incorporated by reference herein.
ITEM 8.01.    Other Events.
On February 3, 2019, the Board of Directors of Aimco declared a special dividend payable to holders of Aimco's common stock that consists of $67.1 million in cash and 4.5 million shares of common stock. The special dividend will be payable on March 22, 2019, to stockholders of record as of February 22, 2019. Stockholders will have the option to elect to receive payment of the special dividend in cash or shares, subject to customary proration. Based on the closing price of $49.07 per share of Aimco common stock on February 1, 2019, the aggregate value of the special dividend is estimated to be approximately $287.9 million, or $1.93 per share. The actual value will vary depending on the price of Aimco common stock on the dividend valuation dates (March 11 and 12, 2019). Cash will be paid in lieu of fractional shares. Election materials will be sent to stockholders of record promptly after February 22, 2019. Stockholders who fail to return a properly completed election form before 5:00 p.m., Eastern Time, on March 8, 2019, will be deemed to have made an election to receive the special dividend in cash.
On February 3, 2019, the Board of Directors of Aimco also authorized a reverse stock split, effective on February 20, 2019. The split ratio for the reverse stock split will be determined at a later date, but is intended to neutralize the dilutive impact of the stock issued in the special dividend. Total shares of Aimco common stock outstanding following completion of both the special dividend and the reverse stock split are expected to be unchanged from the total shares outstanding immediately prior to the dividend. Some stockholders may have more Aimco shares and some may have fewer based on their individual elections.
ITEM 9.01.     Financial Statements and Exhibits.
The following exhibits are furnished with this report:
Exhibit Number
Description
Fourth Quarter 2018 Earnings Release dated February 4, 2019

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: February 4, 2019

APARTMENT INVESTMENT AND MANAGEMENT COMPANY


/s/ Paul Beldin
___________________________________________
Paul Beldin
Executive Vice President and Chief Financial Officer



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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
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Page
 
Earnings Release
 
 
 
Consolidated Statements of Operations
 
 
 
Consolidated Balance Sheets
 
 
 
 
Schedule 1    –   Funds From Operations and Adjusted Funds From Operations Reconciliation
 
 
 
Schedule 2    –   Funds From Operations and Adjusted Funds From Operations Information
 
 
 
Schedule 3    –   Property Net Operating Income - Real Estate
 
 
 
 
Schedule 4    –   Apartment Home Summary
 
 
 
Schedule 5    –   Capitalization and Financial Metrics
 
 
 
Schedule 6    –   Same Store Operating Results
 
 
 
 
Schedule 7    –   Real Estate Portfolio Data by Market
 
 
 
Schedule 8    –   Apartment Community Disposition and Acquisition Activity
 
 
 
Schedule 9    –   Real Estate Capital Additions Information
 
 
 
Schedule 10  –   Redevelopment Portfolio
 
 
 
Glossary and Reconciliations of Non-GAAP Financial and Operating Measures



























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Aimco Reports Fourth Quarter Results
Denver, Colorado, February 4, 2019 - Apartment Investment and Management Company (“Aimco”) (NYSE: AIV) announced today fourth quarter results for 2018.
Chairman and Chief Executive Officer Terry Considine comments: “2018 was a solid year for Aimco. We increased estimated Net Asset Value per share by about 6% which, with our cash dividend, provided shareholders Economic Income of 8.5%. In our Same Store portfolio, we set company records for occupancy and NOI margins. In Redevelopment, we completed two major projects and continued investment in this accretive line of business. Our capital allocation activity led to an improved portfolio through investment in community acquisitions, capital enhancements, and redevelopments. We also repurchased 6% of our shares at a 20% discount to Aimco published Net Asset Value per share. We funded these accretive investments with proceeds from the sales of our Asset Management business and properties with lower expected Free Cash Flow growth. In aggregate, we redeployed $1.1 billion of capital, increasing its expected Free Cash Flow returns by 420 basis points.”
“Following a strong 2018, we expect 2019 to be another good year. We benefit from starting the year more highly occupied at our Same Store communities: 80 basis points higher than last year. Additionally, our 2018 book of business is expected to contribute 150 basis points to our 2019 Same Store revenue growth, 30 basis points greater than the 2017 contribution to 2018. Finally, Aimco’s diversified portfolio provides important protection from continued building in certain markets.”
Chief Financial Officer Paul Beldin adds: “Full year 2018 AFFO of $2.16 per share and Pro forma FFO of $2.47 per share both were $0.03 ahead of the midpoint of our original guidance when adjusted for transactional activity. In the fourth quarter, we refinanced $867 million of our property loans maturing in the next three years, providing annual interest savings of $13 million and increasing the size of our pool of unencumbered properties to $2.7 billion.”
“In 2019, we expect Same Store revenue growth to be between 2.80% to 3.80%, and Same Store expense growth to be between 2.00% and 3.00%, resulting in Same Store NOI growth between 2.70% and 4.50%. Same Store operations are expected to add $0.11 per share, and lower interest expense to add $0.04 per share, to AFFO; this growth will be offset by lower nonrecurring income tax benefit of $0.08 per share and revenue lost from the sale of the Asset Management business and from apartment communities sold to fund investment in redevelopment and development, capital enhancements, and property acquisitions. We anticipate AFFO per share in the range of $2.12 to $2.22, up $0.01 at the midpoint from 2018. In 2019, we expect 98% of our AFFO to be derived from Real Estate Operations, providing an improved quality of earnings.”
Financial Results: Full Year Pro forma FFO Up 1%; AFFO Up 2%
 
FOURTH QUARTER
 
FULL YEAR
(all items per common share - diluted)
2018
 
2017
 
Variance
 
2018
 
2017
 
Variance
Net income
$
0.03

 
$
1.67

 
(98
%)
 
$
4.21

 
$
1.96

 
115
%
Funds From Operations (FFO)
$
0.62

 
$
0.63

 
(2
%)
 
$
2.55

 
$
2.45

 
4
%
Pro forma adjustments, net*
$
0.01


$
0.00

 
%
 
$
(0.08
)
 
$
0.00

 
%
Pro forma Funds From Operations (Pro forma FFO)
$
0.63

 
$
0.63

 
%
 
$
2.47

 
$
2.45

 
1
%
Deduct Capital Replacements
$
(0.11
)
 
$
(0.07
)
 
57
%
 
$
(0.31
)
 
$
(0.33
)
 
(6
%)
Adjusted Funds From Operations (AFFO)
$
0.52

 
$
0.56

 
(7
%)
 
$
2.16

 
$
2.12

 
2
%
*See Supplemental Schedule 1 for a detailed list of Pro forma adjustments to FFO.
Net Income (per diluted common share) - Year-over-year, fourth quarter net income decreased primarily due to lower gains on the sale of apartment communities.

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Pro forma FFO (per diluted common share) - Aimco’s fourth quarter Pro forma FFO per share was flat year-over-year due to the following items:
$0.02 from Same Store Property Net Operating Income growth of 3.6%, driven by a 3.4% increase in revenue, offset by a 3.0% increase in expenses;
$0.04 Net Operating Income contribution from redevelopment communities and lease-up communities; and
$0.04 Net Operating Income contributions from 2018 property acquisitions; offset by
($0.07) lower contribution from the sale of the Asset Management business and from apartment communities sold in 2018 to fund Aimco’s investment activities; and
($0.03) lower tax benefits and other items, net.
Adjusted Funds from Operations (per diluted common share) - AFFO per share decreased $0.04 due to higher capital replacement spending in 2018, due to a greater percentage of annual spend occurring in the fourth quarter.
Operating Results: Fourth Quarter Same Store NOI Up 3.6%; Full Year Up 3.1%
 
FOURTH QUARTER
FULL YEAR
 
Year-over-Year
Sequential
Year-over-Year
 
2018
2017
Variance
3rd Qtr.
Variance
2018
2017
Variance
Average Rent per Apartment Home
$1,853
$1,803
2.8
%
$1,843
0.5
%
$1,831
$1,783
2.7
%
Other Income per Apartment Home*
111
110
0.9
%
125
(11.2
%)
116
114
1.8
%
Average Revenue per Apartment Home*
$1,964
$1,913
2.7
%
$1,968
(0.2
%)
$1,947
$1,897
2.6
%
Average Daily Occupancy
96.9
%
96.3
%
0.6
%
96.3
%
0.6
%
96.5
%
96.0
%
0.5
%
 
 
 
 
 
 
 
 
 
$ in Millions
 
 
 
 
 
 
 
 
Revenue, before utility reimbursements
$147.1
$142.3
3.4
%
$146.4
0.5
%
$580.5
$563.0
3.1
%
Expenses, net of utility reimbursements
35.9
34.9
3.0
%
38.3
(6.1
%)
150.0
145.3
3.3
%
NOI
$111.2
$107.4
3.6
%
$108.1
2.8
%
$430.5
$417.7
3.1
%
*
In 2018, Aimco changed its presentation of revenues and expenses to reflect utility costs net of amounts reimbursed by residents, which were previously included in revenue. 2017 amounts have been revised to conform to this presentation. The change in presentation reduced revenue growth rates in fourth quarter 2018 by 20 basis points and reduced full year 2018 by 10 basis points.
Same Store Rental Rates - Aimco measures changes in rental rates by comparing, on a lease-by-lease basis, the rate on a newly executed lease to the rate on the expiring lease for that same apartment. Newly executed leases are classified either as a new lease, where a vacant apartment is leased to a new customer, or as a renewal. The table below details changes in new and renewal lease rates.
2018
1st Qtr.
2nd Qtr.
3rd Qtr.
Oct
Nov
Dec
4th Qtr.
Full Year
Renewal rent increases
4.9
%
4.8
%
4.2
%
4.2
%
4.3
%
5.0
%
4.3
%
4.5
%
New lease rent increases
0.4
%
1.9
%
2.2
%
0.8
%
(0.2
%)
(0.1
%)
0.2
%
1.5
%
Weighted average rent increases
2.7
%
3.4
%
3.2
%
2.5
%
1.6
%
1.4
%
2.0
%
3.0
%
Average Daily Occupancy
96.3
%
96.3
%
96.3
%
96.8
%
96.9
%
97.1
%
96.9
%
96.5
%
Redevelopment
Redevelopment is Aimco’s second line of business where Aimco creates value by repositioning communities within the Aimco portfolio. Aimco also undertakes limited ground-up development when warranted by risk-adjusted investment returns, either directly or in connection with the redevelopment of an existing apartment community. Aimco invests to earn risk-adjusted returns in excess of those expected from the apartment

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communities sold in paired trades to fund the redevelopment and development. Of these two activities, Aimco favors redevelopment because it permits adjustment of the scope and timing of spending to align with changing market conditions and customer preferences.
During the fourth quarter, Aimco invested $51 million in redevelopment and development. Aimco continued redevelopment activities in Miami at its Flamingo South Beach and Bay Parc communities, and in Los Angeles at its Palazzo communities.
Aimco also continued its ground-up construction of Parc Mosaic, in Boulder, Colorado; and The Fremont, on the Anschutz Medical Campus in Aurora, Colorado. As previously announced, construction to build 58 townhomes on land adjacent to Aimco’s Elm Creek Apartments in Elmhurst, Illinois, began in October.
In Center City, Philadelphia, Aimco completed the redevelopment of Park Towne Place, and at December 31, 2018, had leased 96% of the apartment homes at the community. This multi-year redevelopment of 940 apartment homes, amenities, and common area spaces, was executed on plan and leased-up in line with expectations, with expected Free Cash Flow returns greater than 9%.
In San Jose, Aimco completed the redevelopment of Saybrook Pointe, a 324-apartment home, garden-style community. Construction was completed on-time and in-line with underwritten costs, and lease-up of the community finished ahead of schedule and at rates above underwriting, increasing the expected Free Cash Flow return to greater than 14%, a 100-basis point outperformance to underwriting.
During the fourth quarter, Aimco leased 66 apartment homes at Redevelopment communities. At December 31, 2018, Aimco’s exposure to lease-up at active redevelopment and development communities was approximately 366 apartment homes, of which 208 were being constructed at Parc Mosaic and 158 were located in four other communities. Additionally, Aimco expects to acquire One Ardmore in 2019 upon its completion, as part of the Philadelphia portfolio acquisition announced in April 2018. This acquisition will increase Aimco’s exposure to lease-up risk by approximately 100 apartment homes.
Portfolio Management: Revenue Per Apartment Home Up 4% to $2,126
Aimco’s portfolio of apartment communities is diversified across “A,” “B,” and “C+” price points, averaging “B/B+” in quality and is also diversified across several of the largest markets in the United States.
As part of its portfolio strategy, Aimco seeks to sell up to 10% of its portfolio annually and to reinvest the proceeds from such sales in accretive uses such as capital enhancements, redevelopments, occasional developments, and selective acquisitions with projected Free Cash Flow internal rates of return higher than expected from the communities being sold. Through this disciplined approach to capital recycling, Aimco significantly increases the quality and expected growth rate of its portfolio.

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FOURTH QUARTER
 
2018
2017
Variance
Apartment Communities
134

136

(2
)
Apartment Homes
36,549

36,904

(355
)
Average Revenue per Apartment Home*
$
2,126

$
2,049

4
%
Portfolio Average Rents as a Percentage of Local Market Average Rents
113
%
113
%
%
Percentage A (4Q 2018 Average Revenue per Apartment Home $2,786)
51
%
53
%
(2
%)
Percentage B (4Q 2018 Average Revenue per Apartment Home $1,850)
33
%
32
%
1
%
Percentage C+ (4Q 2018 Average Revenue per Apartment Home $1,706)
16
%
15
%
1
%
NOI Margin
73
%
72
%
1
%
Free Cash Flow Margin
69
%
67
%
2
%
*
In 2018, Aimco changed its presentation of revenues and expenses to reflect utilities costs net of amounts reimbursed by residents, which were previously included in revenue. 2017 amounts have been revised to conform to this presentation. Including these reimbursements in revenue would have resulted in total Average Revenue per Aimco Apartment Home of $2,205 and $2,123 for the quarters ended December 31, 2018 and 2017, respectively.
Fourth Quarter Real Estate Portfolio - For its entire portfolio, Aimco’s average monthly revenue per apartment home was $2,126 for fourth quarter 2018, a 4% increase compared to fourth quarter 2017. This increase is due to year-over-year growth in Same Store revenue as well as Aimco’s acquisition activities, lease-up of redevelopment and acquisition communities, and sales of communities with average monthly revenues per apartment home lower than those of the retained portfolio.
Acquisitions - Aimco evaluates potential acquisitions with an eye for unique and opportunistic investments and funds acquisitions pursuant to its strict “paired trade” discipline.
In December, Aimco acquired for $30 million Avery Row, a 67-apartment home community in Arlington, Virginia. Avery Row is well-located in the Washington D.C. area, approximately two miles north of the Pentagon and three miles north of Crystal City. Aimco expects its operation of this community will generate a Free Cash Flow internal rate of return of almost 9%.
Dispositions - Aimco did not sell any apartment communities in the fourth quarter.
In January 2019, Aimco sold two apartment communities with 782 apartment homes for gross proceeds of $141 million. One community was located in Schaumburg, Illinois and the other located in Virginia Beach, Virginia.
Balance Sheet
Aimco Leverage
Aimco’s leverage strategy seeks to increase financial returns while using leverage with appropriate caution. Aimco limits risk through balance sheet structure, employing low leverage, primarily non-recourse and long-dated property debt; builds financial flexibility by maintaining ample unused and available credit as well as holding properties with substantial value unencumbered by property debt; and uses partners’ capital when it enhances financial returns or reduces investment risk.

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Aimco total leverage includes Aimco share of long-term, non-recourse, property debt encumbering apartment communities, outstanding borrowings under its revolving credit facility, and outstanding preferred equity.
 
AS OF DECEMBER 31, 2018
$ in Millions
Amount
% of Total
Weighted Avg. Maturity (Yrs.)
Aimco share of long-term, non-recourse property debt
$
3,927

91
%
8.0

Outstanding borrowings on revolving credit facility
160

4
%
3.1

Preferred Equity*
226

5
%
40.0

Total Leverage
$
4,313

100
%
9.5

Cash, restricted cash and investments in securitization trust assets
(160
)
 
 
Property debt secured by assets held for sale
23

 
 
Net Leverage, as adjusted
$
4,176

 
 
*
Aimco’s Preferred Equity is perpetual in nature; however, for illustrative purposes, Aimco has computed the weighted average maturity of its total leverage assuming a 40-year maturity for its Preferred Equity.
Leverage Ratios
Aimco target leverage ratios are Proportionate Debt and Preferred Equity to Adjusted EBITDA below 7.0x and Adjusted EBITDA to Interest Expense and Preferred Dividends greater than 2.5x. Aimco calculates Adjusted EBITDA, and Adjusted Interest Expense used in its leverage ratios based on current quarter amounts, annualized.
Proportionate Debt to Adjusted EBITDA
 6.8x
Proportionate Debt and Preferred Equity to Adjusted EBITDA
 7.2x
Adjusted EBITDA to Adjusted Interest Expense
 3.8x
Adjusted EBITDA to Adjusted Interest Expense and Preferred Dividends
 3.4x
Aimco’s Adjusted EBITDA has been calculated on a pro forma basis to adjust for significant items impacting the quarter for which annualization would distort the results. Leverage ratios are elevated by 0.5x due to the use of debt to fund temporarily share repurchases completed during fourth quarter 2018. Aimco intends to reduce its Proportionate Debt and Preferred Equity to Adjusted EBITDA to 6.9x by the end of 2019 from earnings growth, primarily due to increasing contribution from same store apartment communities and reduction of debt balances due to regularly-scheduled debt amortization and apartment community sales, partially offset by the loss of earnings from communities sold.
Refinancing Activity
During the fourth quarter, Aimco addressed more than half of its property debt maturing in 2019, 2020 and 2021. Aimco placed $867 million of new loans: $740 million of fixed-rate loans at a weighted average interest rate of 4.2% and a weighted average term of 9.3 years; and $127 million of variable-rate loans with rates floating at 115 basis points over 30-day LIBOR and a weighted average term of 5.1 years. Aimco also repaid property-level debt increasing the fair value of unencumbered properties to $2.7 billion, a 50% increase during 2018. This refinancing activity results in annual interest savings of $13 million.
In connection with fourth quarter financing activity, Aimco incurred approximately $14 million of debt extinguishment costs, net of tax, which are excluded from Pro forma FFO.
Liquidity
During the fourth quarter, Aimco exercised its $200 million expansion option on its revolving credit facility, increasing the total capacity of the credit facility to $800 million.

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At December 31, 2018, Aimco held cash and restricted cash of $73 million and had the capacity to borrow $633 million under its revolving credit facility, after consideration of $7 million of letters of credit backed by the facility. Aimco uses its credit facility primarily for working capital and other short-term purposes and to secure letters of credit.
Equity Capital Activities; Special Dividend
During the fourth quarter, Aimco repurchased 8.7 million shares of its common stock for $394 million, at a weighted average price of $45.33 per share, approximately a 20% discount to Aimco’s published Net Asset Value per share. Approximately half of the repurchases were funded with proceeds from 2018 and January 2019 property sales at a premium to the values ascribed to these communities in Aimco’s published Net Asset Value. The remaining half of repurchases are temporarily funded with borrowings on our credit facility. We expect to repay these borrowings with proceeds from the sale of communities now under contract, again at prices greater than those used in Aimco’s Net Asset Value. With the completion of these transactions, Aimco    will have increased Net Asset Value per share by an estimated $0.67, or $106 million.
The 2019 property sales necessary to fund Aimco’s share repurchases are expected to generate taxable gains of $285 million, which is in excess of the company’s regular quarterly dividend. Accordingly, on February 3, 2019, Aimco's Board of Directors declared a special dividend on the common stock that consists of $67.1 million in cash and 4.5 million shares of common stock. The special dividend will be payable on March 22, 2019, to stockholders of record as of February 22, 2019.
The special dividend amount includes the regular quarterly cash dividend, which for 2019 will be $0.39 per share (an increase of 3% compared to cash dividends paid during 2018). Additionally, stockholders will receive $1.54 per share predominantly in stock (based on Aimco’s closing price of $49.07 on February 1, 2019).
Stockholders will have the opportunity to elect to receive the special dividend in the form of all cash or all stock, subject to proration if either option is oversubscribed. Based on Aimco's closing share price on February 1, 2019, we estimate the aggregate value of the special dividend to be approximately $287.9 million, or $1.93 per share. However, the actual value will vary, depending on the price of Aimco common stock on the dividend valuation dates (March 11 and 12, 2019).
In order to neutralize the dilutive impact of the stock issued in the special dividend, Aimco's Board also authorized a reverse stock split, effective on February 20, 2019. As a result, total shares outstanding following completion of both the special dividend and the reverse stock split are expected to be unchanged from the total shares outstanding immediately prior to the dividend. Some stockholders may have more Aimco shares and some may have fewer based on their individual elections. The reverse split will ensure comparability of Aimco per share results before and after these transactions.
In summary, these transactions:
Increase Net Asset Value per share by 1%;
Do not affect Aimco’s regular quarterly cash dividend;
Reduce the number of Aimco shares outstanding by 6% (as a result of the share repurchases);
Minimize the aggregate tax paid by Aimco and its stockholders;
Are leverage neutral; and
Result in no change in the number of shares outstanding immediately prior to the dividend (as a result of the special dividend and the reverse stock split), thereby improving comparability of per share results.
Aimco is currently authorized to repurchase an additional 10.6 million shares under its existing share repurchase program.

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2019 Outlook
The Aimco strategy remains unchanged: focusing on excellence in property operations; value creation through redevelopment and occasional development; portfolio management based on a disciplined approach to capital recycling; a safe, flexible balance sheet with abundant liquidity; and a simple business model executed by a performance-oriented and collaborative team. Aimco executes this consistent strategy with an eye on sustainable long-term growth.
Components of 2018 to 2019 AFFO Growth
(at the midpoint of guidance range)
396612251_affowalkupdatedhighres.jpg
Aimco expects 2019 Pro forma FFO per share in the range of $2.41 to $2.51 with AFFO per share of $2.12 to $2.22. At the guidance range midpoint, Aimco’s projected 2019 AFFO growth of $0.01 reflects:
$0.11 per share growth from its Same Store portfolio;
$0.04 from interest expense savings;
($0.04) per share net dilution from the Asset Management business paired trade, which includes dilution from the sale of the Asset Management business, partially offset by the reinvestment of proceeds in 2018 acquisitions and repayment of debt; and
($0.08) per share lower tax benefit;
($0.02) per share net reduction from other activities including positive contribution from redevelopment and development, offset by sales of apartment communities to fund redevelopment. Share repurchases are expected to be AFFO neutral.
Effective January 1, 2019, Aimco will adopt new accounting guidance that changes how Aimco recognizes costs incurred to obtain resident leases. In prior years, Aimco deferred certain costs based on the percentage of successful leases. Under the new standard, only costs that are contingent upon a signed lease may be deferred. Aimco’s calculation of AFFO has historically included these costs as a component of Capital Replacements, therefore, it will be unchanged as a result of the change in accounting standard. The amortization of these costs was excluded from Pro forma FFO as a component of real estate related depreciation. Had the accounting change been effective in 2018, Pro forma FFO would have been approximately $0.02 per share lower than reported.

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($ Amounts represent Aimco Share)
FULL YEAR 2019
FULL YEAR 2018
 
 
 
 
Net Income per share
$3.13 to $3.63
$4.21
Pro forma FFO per share
$2.41 to $2.51
$ 2.47 / $ 2.45 [1]
AFFO per share
$2.12 to $2.22
$2.16
 
 
 
Select Components of FFO
 
 
Same Store Operating Measures
 
 
Revenue change compared to prior year
2.80% to 3.80%
3.10%
Expense change compared to prior year
2.00% to 3.00%
3.30%
NOI change compared to prior year
2.70% to 4.50%
3.10%
 
 
 
Other Earnings
 
 
Asset Management Contribution
$22M
Tax Benefits [2]
$7M to $9M
$21M
 
 
 
Offsite Costs
 
 
Property management expenses
$20M
$21M
General and administrative expenses
$47M
$46M
Total Offsite Costs
$67M
$67M
 
 
 
Capital Investments
 
 
Redevelopment/Development
$225M to $275M
$176M
Capital Enhancements
$80M to $100M
$103M
 
 
 
Transactions
 
 
Property dispositions
$750M to $850M
$825M
Property acquisitions [3]
$65M
$498M
 
 
 
Portfolio Quality
 
 
Average revenue per apartment home
~$2,220
$2,126
 
 
 
Balance Sheet
 
 
Proportionate Debt to Adjusted EBITDA
~6.7x
 6.8x
Proportionate Debt and Preferred Equity to Adjusted EBITDA
~6.9x
 7.2x
[1]
Adjusted Pro forma FFO per share of $2.45 reflects the $0.02 per share impact of the change in lease accounting discussed on page 8.
[2]
Tax benefits are forecasted to decline in 2019 as the last of the historic tax benefits related to redevelopments in Philadelphia were earned in 2018 and due to lower run rate tax benefits from routine activities in Aimco’s Taxable REIT Subsidiary.
[3]
Aimco does not predict or guide to acquisitions. This amount represents the purchase price for One Ardmore, which was contracted to be acquired upon its completion as part of the Philadelphia portfolio acquisition announced in April 2018. Aimco monitors potential transactions with an eye for unique and opportunistic investments and funds acquisitions pursuant to its strict paired trade discipline.
($ Amounts represent Aimco Share)
FIRST QUARTER 2019
 
 
Net income per share
$1.59 to $1.64
Pro forma FFO per share
$0.58 to $0.62
AFFO per share
$0.51 to $0.55

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Earnings Conference Call Information
Live Conference Call:
Conference Call Replay:
Tuesday, February 5, 2019 at 1:00 p.m. ET
Replay available until May 6, 2019
Domestic Dial-In Number: 1-888-317-6003
Domestic Dial-In Number: 1-877-344-7529
International Dial-In Number: 1-412-317-6061
International Dial-In Number: 1-412-317-0088
Passcode: 3725757
Passcode: 10127088
Live webcast and replay: investors.aimco.com
Supplemental Information
The full text of this Earnings Release and the Supplemental Information referenced in this release are available on Aimco’s website at investors.aimco.com.
Glossary & Reconciliations of Non-GAAP Financial and Operating Measures
Financial and operating measures found in this Earnings Release and the Supplemental Information include certain financial measures used by Aimco management that are measures not defined under accounting principles generally accepted in the United States (“GAAP”). Certain Aimco terms and Non-GAAP measures are defined in the Glossary in the Supplemental Information and Non-GAAP measures reconciled to the most comparable GAAP measures.
About Aimco
Aimco is a real estate investment trust focused on the ownership and management of quality apartment communities located in select markets in the United States. Aimco is one of the country’s largest owners and operators of apartments, with ownership interests in 132 communities in 17 states and the District of Columbia. Aimco common shares are traded on the New York Stock Exchange under the ticker symbol AIV, and are included in the S&P 500. For more information about Aimco, please visit our website at www.aimco.com.
Contact
Matt Foster, Director, Investor Relations
Investor Relations 303-793-4661, investor@aimco.com

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Forward-looking Statements
This Earnings Release and Supplemental Information contain forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding projected results and specifically forecasts of first quarter and full year 2019 results, including but not limited to: FFO, Pro forma FFO and selected components thereof; AFFO; Aimco redevelopment and development investments and projected yield on such investments, timelines and Net Operating Income contribution; expectations regarding sales of Aimco apartment communities and the use of proceeds thereof; and Aimco liquidity and leverage metrics.
These forward-looking statements are based on management’s judgment as of this date, which is subject to risks and uncertainties. Risks and uncertainties include, but are not limited to: Aimco’s ability to maintain current or meet projected occupancy, rental rate and property operating results; the effect of acquisitions, dispositions, redevelopments and developments; Aimco’s ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to Aimco redevelopment and development investments; expectations regarding Aimco sales of apartment communities and the use of proceeds thereof; and Aimco’s ability to comply with debt covenants, including financial coverage ratios.
Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond Aimco’s control, including, without limitation:
Real estate and operating risks, including fluctuations in real estate values and the general economic climate in the markets in which Aimco operates and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the amount, location and quality of competitive new housing supply; the timing of acquisitions, dispositions, redevelopments and developments; and changes in operating costs, including energy costs;
Financing risks, including the availability and cost of capital markets’ financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; and the risk that earnings may not be sufficient to maintain compliance with debt covenants;
Insurance risks, including the cost of insurance, and natural disasters and severe weather such as hurricanes; and
Legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of governmental regulations that affect Aimco and interpretations of those regulations; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently or previously owned by Aimco.
In addition, Aimco’s current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code and depends on Aimco’s ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership.
Readers should carefully review Aimco’s financial statements and the notes thereto, as well as the section entitled “Risk Factors” in Item 1A of Aimco’s Annual Report on Form 10-K for the year ended December 31, 2017, and the other documents Aimco files from time to time with the Securities and Exchange Commission.
These forward-looking statements reflect management’s judgment as of this date, and Aimco assumes no obligation to revise or update them to reflect future events or circumstances. This press release does not constitute an offer of securities for sale.

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Consolidated Statements of Operations
 
 
 
 
 
 
 
 
(in thousands, except per share data) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
 
December 31,
 
December 31,
 
 
2018
 
2017
 
2018
 
2017
REVENUES
 
 
 
 
 
 
 
 
Rental and other property revenues attributable to Real Estate
 
$
232,022

 
$
231,509

 
$
922,593

 
$
918,148

Rental and other property revenues of partnerships served by Asset Management business
 

 
18,719

 
42,830

 
74,046

Tax credit and transaction revenues
 

 
5,001

 
6,987

 
13,243

Total revenues
 
232,022

 
255,229

 
972,410

 
1,005,437

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
Property operating expenses attributable to Real Estate
 
75,329

 
79,172

 
307,901

 
319,126

Property operating expenses of partnerships served by Asset Management business
 
56

 
9,000

 
20,921

 
35,458

Depreciation and amortization
 
91,347

 
97,348

 
377,786

 
366,184

General and administrative expenses
 
9,074

 
12,058

 
46,268

 
43,657

Other (income) expenses, net
 
(9,848
)
 
4,487

 
3,778

 
11,148

Provision for real estate impairment loss
 

 
35,881

 

 
35,881

Total operating expenses
 
165,958

 
237,946

 
756,654

 
811,454

Operating income
 
66,064

 
17,283

 
215,756

 
193,983

Interest income
 
3,146

 
2,081

 
10,914

 
8,332

Interest expense
 
(57,441
)
 
(49,193
)
 
(200,634
)
 
(194,615
)
(Loss) gain on dispositions of real estate and the Asset Management business
 
(2,274
)
 
297,793

 
677,463

 
300,849

Other, net
 
(64
)
 
92

 
77

 
7,694

Income before income tax benefit
 
9,431

 
268,056

 
703,576

 
316,243

Income tax benefit
 
409

 
18,133

 
13,027

 
30,836

Net income
 
9,840

 
286,189

 
716,603

 
347,079

Noncontrolling interests:
 
 
 
 
 
 
 
 
Net income attributable to noncontrolling interests in consolidated real estate partnerships
 
(175
)
 
(7,569
)
 
(8,220
)
 
(9,084
)
Net income attributable to preferred noncontrolling interests in Aimco OP
 
(1,934
)
 
(1,938
)
 
(7,739
)
 
(7,764
)
Net income attributable to common noncontrolling interests in Aimco OP
 
(324
)
 
(12,293
)
 
(34,417
)
 
(14,457
)
Net income attributable to noncontrolling interests
 
(2,433
)
 
(21,800
)
 
(50,376
)
 
(31,305
)
Net income attributable to Aimco
 
7,407

 
264,389

 
666,227

 
315,774

Net income attributable to Aimco preferred stockholders
 
(2,148
)
 
(2,149
)
 
(8,593
)
 
(8,594
)
Net income attributable to participating securities
 
(33
)
 
(143
)
 
(1,037
)
 
(319
)
Net income attributable to Aimco common stockholders
 
$
5,226

 
$
262,097

 
$
656,597

 
$
306,861

 
 
 
 
 
 
 
 
 
Net income attributable to Aimco per common share – basic
 
$
0.03

 
$
1.68

 
$
4.21

 
$
1.96

 
 
 
 
 
 
 
 
 
Net income attributable to Aimco per common share – diluted
 
$
0.03

 
$
1.67

 
$
4.21

 
$
1.96

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding – basic
 
153,441

 
156,423

 
155,866

 
156,323

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding – diluted
 
153,705

 
156,878

 
156,053

 
156,796

 
 
 
 
 
 
 
 
 


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Consolidated Balance Sheets
(in thousands) (unaudited)
 
 
 
December 31,
 
 
 
2018
 
2017
Assets
 
 
 
 
Real estate
 
$
8,308,590

 
$
7,927,753

Accumulated depreciation
 
(2,585,115
)
 
(2,522,358
)
Net real estate
 
5,723,475

 
5,405,395

Cash and cash equivalents
 
36,858

 
60,498

Restricted cash
 
35,737

 
34,827

Goodwill
 
37,808

 
37,808

Other assets
 
313,733

 
234,931

Assets held for sale
 
42,393

 
17,959

Assets of partnerships served by Asset Management business:
 
 
 
 
Real estate, net
 

 
224,873

Cash and cash equivalents
 

 
16,288

Restricted cash
 

 
30,928

Other assets
 

 
15,533

Total Assets
 
$
6,190,004

 
$
6,079,040

 
 
 
 
 
 
Liabilities and Equity
 
 
 
 
Non-recourse property debt secured by Aimco Real Estate communities
 
$
3,937,000

 
$
3,563,041

Debt issue costs
 
(21,695
)
 
(17,932
)
Non-recourse property debt, net
 
3,915,305

 
3,545,109

Term loan, net
 

 
249,501

Revolving credit facility borrowings
 
160,360

 
67,160

Accrued liabilities and other
 
226,230

 
213,027

Liabilities related to assets held for sale
 
23,177

 

 
 
 
 
 
 
Liabilities of partnerships served by Asset Management business:
 
 
 
 
Non-recourse property debt, net
 

 
227,141

Accrued liabilities and other
 

 
19,812

Total Liabilities
 
4,325,072

 
4,321,750

 
 
 
 
 
 
Preferred noncontrolling interests in Aimco OP
 
101,291

 
101,537

Equity:
 
 
 
 
Perpetual preferred stock
 
125,000

 
125,000

Class A Common Stock
 
1,491

 
1,572

Additional paid-in capital
 
3,515,641

 
3,900,042

Accumulated other comprehensive income
 
4,794

 
3,603

Distributions in excess of earnings
 
(1,947,507
)
 
(2,367,073
)
Total Aimco equity
 
1,699,419

 
1,663,144

Noncontrolling interests in consolidated real estate partnerships
 
(2,967
)
 
(1,716
)
Common noncontrolling interests in Aimco OP
 
67,189

 
(5,675
)
Total equity
 
1,763,641

 
1,655,753

Total liabilities and equity
 
$
6,190,004

 
$
6,079,040

 
 

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Supplemental Schedule 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Funds From Operations and Adjusted Funds From Operations Reconciliation
 
(Page 1 of 2)
 
Three Months and Year Ended December 31, 2018 Compared to Three Months and Year Ended December 31, 2017
(in thousands, except per share data) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aimco believes that Economic Income (defined as Net Asset Value, or NAV, growth plus dividends) is an important measure of long-term financial performance. NAV is used by many investors because the value of company assets can be readily estimated, even for non-earning assets such as land or properties under development. NAV has the advantage of incorporating the investment decisions of thousands of real estate investors, enhancing comparability among companies that have differences in their accounting, and avoiding disparity that can result from application of GAAP to investment properties and various ownership structures. Some investors focus on multiples of AFFO and FFO. Aimco’s disclosure of AFFO and FFO complements its focus on Economic Income.
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
 
2018
 
2017
 
2018
 
2017
Net income attributable to Aimco common stockholders
 
$
5,226

 
$
262,097

 
$
656,597

 
$
306,861

Adjustments:
 
 
 
 
 
 
 
 
Real estate depreciation and amortization, net of noncontrolling partners’ interest
 
89,163

 
94,700

 
368,961

 
352,109

Loss (gain) on dispositions and other, net of noncontrolling partners’ interest
 
2,311

 
(254,631
)
 
(669,450
)
 
(262,583
)
Income tax adjustments related to gain on dispositions and other items [1]
 
3,497

 
(10,440
)
 
27,310

 
(8,265
)
Common noncontrolling interests in Aimco OP’s share of above adjustments
 
(4,900
)
 
7,637

 
14,063

 
(3,810
)
Amounts allocable to participating securities
 
(127
)
 
41

 
402

 
(81
)
FFO Attributable to Aimco common stockholders
 
$
95,170

 
$
99,404

 
$
397,883

 
$
384,231

Adjustments, all net of common noncontrolling interests in Aimco OP and participating securities:
 
 
 
 
 
 
 
 
Tax provision (benefit) related to tax reform legislation [2]
 
273

 
(498
)
 
273

 
(498
)
Tax benefit due to release of valuation allowance [3]
 

 

 
(19,349
)
 

Litigation, net [4]
 
(13,191
)
 

 
(8,558
)
 

Severance costs [5]
 

 

 
1,282

 

Prepayment penalties, net [6]
 
14,089

 

 
14,089

 

Pro forma FFO Attributable to Aimco common stockholders
 
$
96,341

 
$
98,906

 
$
385,620

 
$
383,733

Capital Replacements, net of common noncontrolling interests in Aimco OP and participating securities
 
(16,248
)
 
(11,008
)
 
(48,493
)
 
(51,760
)
AFFO Attributable to Aimco common stockholders
 
$
80,093

 
$
87,898

 
$
337,127

 
$
331,973

 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding
 
153,441

 
156,423

 
155,866

 
156,323

Dilutive common share equivalents
 
264

 
455

 
187

 
473

Total shares and dilutive share equivalents
 
153,705

 
156,878

 
156,053

 
156,796

 
 
 
 
 
 
 
 
 
 
Net income attributable to Aimco per common share – diluted
 
$
0.03

 
$
1.67

 
$
4.21

 
$
1.96

FFO per share – diluted
 
$
0.62

 
$
0.63

 
$
2.55

 
$
2.45

Pro forma FFO per share – diluted
 
$
0.63

 
$
0.63

 
$
2.47

 
$
2.45

AFFO per share – diluted
 
$
0.52

 
$
0.56

 
$
2.16

 
$
2.12

[1]
For the year ended December 31, 2018, income taxes related to gain on dispositions and other items includes tax on the gain on the sale of the Asset Management business, as well as tax on the gain on the sale of apartment communities during the year ended December 31, 2018.
[2]
In connection with the Tax Cuts and Jobs Act signed into law December 2017, Aimco recognized income tax benefit during the fourth quarter 2017 and adjusted the estimated impact of tax reform upon the conclusion of its analysis of the effects during the fourth quarter 2018. Aimco has excluded such amounts from Pro forma FFO.
[3]
Due to the sale of the Asset Management business, Aimco expects to realize its deferred tax benefits. As a result, Aimco has determined that a valuation allowance is no longer necessary. Aimco excluded the effect of the establishment of the valuation allowance from Pro forma FFO and as such has excluded the benefit from its release.
[4]
During 2018, Aimco was engaged in litigation with Airbnb, which was resolved during the fourth quarter. Due to the unpredictable nature of these proceedings, related amounts recognized, net of income tax effect, have been excluded from Pro forma FFO.
[5]
Aimco incurred severance costs in connection with the sale of its Asset Management business. Aimco excludes such costs from Pro forma FFO because it believes these costs are closely related to the sale of the business.
[6]
In connection with fourth quarter refinancing activity, Aimco incurred debt extinguishment costs, net of income tax effect, which have been excluded from Pro forma FFO.

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Supplemental Schedule 2(a)
 
 
 
 
 
 
 
 
 
 
 
 
 
Funds From Operations and Adjusted Funds From Operations Information
 
(Page 1 of 2)
 
Three Months and Year Ended December 31, 2018 Compared to Three Months and Year Ended December 31, 2017
 
 
 
 
(consolidated amounts, in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
 
December 31,
 
December 31,
 
 
2018
 
2017
 
2018
 
2017
Real Estate [1]
 
 
 
 
 
 
 
 
Revenues, before utility reimbursements [2]
 
 
 
 
 
 
 
 
Same Store
 
$
147,833

 
$
142,969

 
$
583,251

 
$
565,754

Redevelopment/Development
 
47,474

 
43,365

 
182,931

 
171,694

Acquisition
 
14,617

 
4,846

 
48,474

 
17,475

Other Real Estate
 
10,741

 
10,479

 
42,734

 
41,394

Total revenues, before utility reimbursements
 
220,665

 
201,659

 
857,390

 
796,317

Expenses, net of utility reimbursements [2]
 
 
 
 
 
 
 
 
Same Store
 
36,063

 
35,032

 
150,808

 
146,000

Redevelopment/Development
 
15,000

 
15,915

 
59,757

 
59,521

Acquisition
 
3,621

 
1,674

 
13,874

 
6,976

Other Real Estate
 
3,848

 
3,509

 
15,458

 
14,746

Total expenses, net of utility reimbursements
 
58,532

 
56,130

 
239,897

 
227,243

Real Estate net operating income
 
162,133

 
145,529

 
617,493

 
569,074

 
 
 
 
 
 
 
 
 
Property management expenses
 
(6,196
)
 
(6,030
)
 
(21,106
)
 
(21,467
)
Casualties
 
(1,482
)
 
(924
)
 
(3,661
)
 
(7,249
)
Other income (expenses), net
 
11,489

 
499

 
5,982

 
(1,079
)
Interest expense on non-recourse property debt
 
(55,286
)
 
(39,848
)
 
(179,688
)
 
(166,881
)
Interest income
 
1,961

 
1,814

 
7,618

 
7,057

FFO related to Sold and Held for Sale communities [3]
 
2,082

 
10,137

 
19,794

 
52,365

Contribution from Real Estate
 
114,701

 
111,177

 
446,432

 
431,820

 
 
 
 
 
 
 
 
 
Contribution from Asset Management [4]
 
(56
)
 
11,165

 
21,002

 
40,286

 
 
 
 
 
 
 
 
 
General and administrative and investment management expenses
 
(9,074
)
 
(12,058
)
 
(46,269
)
 
(43,657
)
Depreciation and amortization related to non-real estate assets
 
(2,082
)
 
(2,659
)
 
(8,624
)
 
(10,173
)
Other expenses, net
 
(1,049
)
 
(2,056
)
 
(7,132
)
 
(5,353
)
Interest expense on corporate borrowings
 
(1,841
)
 
(5,287
)
 
(11,244
)
 
(12,102
)
Historic tax credit benefit
 
1,346

 
1,135

 
6,066

 
5,764

Other tax benefits, net
 
2,561

 
6,558

 
34,271

 
17,909

Preferred dividends and distributions
 
(4,082
)
 
(4,087
)
 
(16,332
)
 
(16,358
)
Common noncontrolling interests in Aimco OP
 
(5,224
)
 
(4,656
)
 
(20,354
)
 
(18,267
)
Amounts allocated to participating securities
 
(160
)
 
(102
)
 
(635
)
 
(400
)
Aimco share of amounts associated with unconsolidated partnerships
 
505

 
814

 
1,913

 
2,319

Noncontrolling interests’ share of the above amounts
 
(375
)
 
(540
)
 
(1,211
)
 
(7,557
)
FFO Attributable to Aimco common stockholders
 
$
95,170

 
$
99,404

 
$
397,883

 
$
384,231

Adjustments, all net of common noncontrolling interests in Aimco OP and participating securities:
 
 
 
 
 
 
 
 
Tax provision (benefit) related to tax reform legislation [5]
 
273

 
(498
)
 
273

 
(498
)
Tax benefit due to valuation allowance release [6]
 

 

 
(19,349
)
 

Litigation settlement, net of costs and income tax effect [7]
 
(13,191
)
 

 
(8,558
)
 

Severance costs [8]
 

 

 
1,282

 

Prepayment penalties, net of income tax effect [9]
 
14,089

 

 
14,089

 

Pro Forma FFO Attributable to Aimco common stockholders
 
$
96,341

 
$
98,906

 
$
385,620

 
$
383,733

Capital Replacements
 
(17,059
)
 
(11,612
)
 
(51,232
)
 
(54,164
)
Noncontrolling interests share of Capital Replacements
 
811

 
604

 
2,739

 
2,404

AFFO Attributable to Aimco common stockholders
 
$
80,093

 
$
87,898

 
$
337,127

 
$
331,973


Please see the following page for footnote descriptions





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Supplemental Schedule 2(a) (continued)
 
 
 
 
Funds From Operations and Adjusted Funds From Operations Information
(Page 2 of 2)
[1]
Contribution from Real Estate consists of property net operating income and other items of income or expense that relate to this portfolio, including property management expenses, casualty losses, interest expense related to non-recourse property debt encumbering the communities in this portfolio, and interest income Aimco earns on its investment in a securitization trust that holds certain Aimco property debt.
[2]
In 2018, Aimco changed its presentation of revenues and expenses to reflect utilities costs net of amounts reimbursed by residents, which were previously included in revenue. 2017 amounts have been revised to conform to this presentation.
[3]
During 2018, Aimco sold its interests in the entities owning the La Jolla Cove property. Also during 2018, Aimco had apartment communities sold or held for sale in the following locations:
Location
Communities Sold
Communities Held for Sale
 
Southern Virginia
2
1
 
Suburban Maryland
1
 
 
North Philadelphia
1
 
 
Hunters Point, San Francisco
4
 
 
Schaumburg, Illinois
 
1
 
[4]
On July 25, 2018, Aimco sold its Asset Management business and interests in the partnerships served by this business. Year-to-date, unconsolidated partnerships served by the Asset Management business contributed $0.8 million to FFO, which is included in Aimco share of amounts associated with unconsolidated partnerships, bringing the proportionate contribution from Asset Management to $22 million prior to its sale.
[5]
In connection with the Tax Cuts and Jobs Act signed into law December 2017, Aimco recognized income tax benefit during the fourth quarter 2017 and adjusted the estimated impact of tax reform upon the conclusion of its analysis of the effects during the fourth quarter 2018. Aimco has excluded such amounts from Pro forma FFO.
[6]
Due to the sale of the Asset Management business, Aimco expects to realize its deferred tax benefits. As a result, Aimco has determined that a valuation allowance is no longer necessary. Aimco excluded the effect of the establishment of the valuation allowance from Pro forma FFO and as such has excluded the benefit from its release.
[7]
During 2018, Aimco was engaged in litigation with Airbnb, which was resolved during the fourth quarter. Due to the unpredictable nature of these proceedings, related amounts recognized have been excluded from Pro forma FFO.
[8]
Aimco incurred severance costs in connection with the sale of its Asset Management business. Aimco excludes such costs from Pro forma FFO because it believes these costs are closely related to the sale of the business.
[9]
In connection with fourth quarter financing activity, Aimco incurred debt extinguishment costs which are excluded from Pro forma FFO. The amount presented is net of income tax effect.


396612251_builcom-2018q3a01.jpg
16

396612251_landscape-2018q3a01.jpg


Supplemental Schedule 2(b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partially Owned Entities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months and Year Ended December 31, 2018 Compared to Three Months and Year Ended December 31, 2017
 
 
 
 
 
 
(Proportionate amounts, in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling Interests [1]
 
Unconsolidated [2]
 
Noncontrolling Interests [1]
 
Unconsolidated [2]
 
 
 
Three Months Ended December 31,
 
Three Months Ended December 31,
 
Year Ended December 31,
 
Year Ended December 31,
 
 
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
Real estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues, before utility reimbursements
 
$
794

 
$
793

 
$
604

 
$
552

 
$
3,150

 
$
14,535

 
$
2,352

 
$
2,204

Expenses, net of utility reimbursements
 
223

 
225

 
2

 

 
1,032

 
4,541

 
505

 
479

 
Net operating income
 
571

 
568

 
602

 
552

 
2,118

 
9,994

 
1,847

 
1,725

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property management expenses, net
 
(33
)
 
(33
)
 
(18
)
 
(60
)
 
(133
)
 
(311
)
 
(179
)
 
(244
)
Casualties
 
(12
)
 
(3
)
 

 

 
5

 
(52
)
 

 

Other Expense, net
 
32

 
(5
)
 

 

 
8

 
(61
)
 

 

Interest expense on non-recourse property debt on Real Estate Operations
 
(163
)
 
(177
)
 
(79
)
 
(83
)
 
(705
)
 
(3,233
)
 
(323
)
 
(339
)
FFO related to Sold and Held For Sale Apartment Communities
 
(2
)
 
203

 

 

 
(22
)
 
786

 

 

 
Contribution from Real Estate
 
393

 
553

 
505

 
409

 
1,271

 
7,123

 
1,345

 
1,142

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contribution from Asset Management
 

 

 

 
405

 

 
316

 
565

 
1,174

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other non-property expenses, net
 
(18
)
 
(13
)
 

 

 
(60
)
 
118

 
3

 
3

FFO
 
$
375

 
$
540

 
$
505

 
$
814

 
$
1,211

 
$
7,557

 
$
1,913

 
$
2,319

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total apartment communities [3]
 
9
 
4
 
 
 
 
 
 
 
 
Total apartment homes [3]
 
3,592
 
142
 
 
 
 
 
 
 
 
Noncontrolling interests’ share of consolidated apartment homes/Aimco share of unconsolidated apartment homes [3]
 
187
 
72
 
 
 
 
 
 
 
 
[1]
Amounts represent the noncontrolling interests’ proportionate share of consolidated amounts. The decrease from year ended December 31, 2017 to 2018 is primarily due to the June 30, 2017 reacquisition of the limited partners’ interest in the Palazzo joint venture.
[2]
Amounts represent Aimco’s proportionate share of the unconsolidated real estate partnerships’ operations.
[3]
Apartment community information excludes Sold Communities.




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17

396612251_landscape-2018q3a01.jpg


Supplemental Schedule 3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property Net Operating Income - Real Estate
 
 
 
 
 
 
 
 
 
 
Trailing Five Quarters
 
 
 
 
 
 
 
 
 
 
 
(consolidated amounts, in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
Revenues, before utility reimbursements [1]
 
 
 
 
 
 
 
 
 
 
 
 
Same Store
 
$
147,833

 
$
147,099

 
$
145,161

 
$
143,158

 
$
142,969

 
 
Redevelopment/Development
 
47,474

 
46,836

 
44,854

 
43,767

 
43,365

 
 
Acquisition
 
14,617

 
15,826

 
11,488

 
6,543

 
4,846

 
 
Other Real Estate
 
10,741

 
10,776

 
10,661

 
10,556

 
10,479

 
 
Total revenues, before utility reimbursements
 
$
220,665

 
$
220,537

 
$
212,164

 
$
204,024

 
$
201,659

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses, net of utility reimbursements [1]
 
 
 
 
 
 
 
 
 
 
 
 
Same Store
 
$
36,063

 
$
38,467

 
$
38,023

 
$
38,255

 
$
35,032

 
 
Redevelopment/Development
 
15,000

 
15,447

 
15,052

 
14,258

 
15,915

 
 
Acquisition
 
3,621

 
4,514

 
3,541

 
2,198

 
1,674

 
 
Other Real Estate
 
3,848

 
3,806

 
3,831

 
3,973

 
3,509

 
 
Total expenses, net of utility reimbursements
 
$
58,532

 
$
62,234

 
$
60,447

 
$
58,684

 
$
56,130

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property Net Operating Income
 
 
 
 
 
 
 
 
 
 
 
 
Same Store
 
$
111,770

 
$
108,632

 
$
107,138

 
$
104,903

 
$
107,937

 
 
Redevelopment/Development
 
32,474

 
31,389

 
29,802

 
29,509

 
27,450

 
 
Acquisition
 
10,996

 
11,312

 
7,947

 
4,345

 
3,172

 
 
Other Real Estate
 
6,893

 
6,970

 
6,830

 
6,583

 
6,970

 
 
Total Property Net Operating Income
 
$
162,133

 
$
158,303

 
$
151,717

 
$
145,340

 
$
145,529

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sold and Held For Sale Property Net Operating Income [2]
 
$
2,314

 
$
3,501

 
$
8,472

 
$
7,984

 
$
13,922

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property net operating income in the table above is presented on a consolidated basis, which includes 100% of consolidated real estate partnership results and excludes the results of unconsolidated real estate partnerships, which are accounted for using the equity method of accounting. Amounts presented also exclude the Property Net Operating Income of apartment communities served by the Asset Management business, which was sold in July 2018.
 
[1]
In 2018, Aimco changed its presentation of revenues and expenses to reflect utilities costs net of amounts reimbursed by residents, which were previously included in revenue. 2017 amounts have been revised to conform to this presentation.
[2]
During 2018, Aimco sold its interests in the entities owning the La Jolla Cove property. Also during 2018, Aimco had apartment communities sold or held for sale in the following locations:
Location
Communities Sold
Communities Held for Sale
Southern Virginia
2
1
Suburban Maryland
1
 
North Philadelphia
1
 
Hunters Point, San Francisco
4
 
Schaumburg, Illinois
 
1


396612251_builcom-2018q3a01.jpg
 
18

396612251_portraita-2018q3a01.jpg

Supplemental Schedule 4
 
 
 
 
 
 
 
 
 
 
 
 
Apartment Home Summary
 
 
 
 
As of December 31, 2018
 
 
 
 
 
(unaudited)
 
 
 
 
 
 
 
 
Number of
Apartment Communities
 
Number of
Apartment Homes
 
Aimco Share of Apartment Homes
Real Estate Portfolio:
 
 
 
 
 
 
Consolidated
 
 
 
 
 
 
 
Same Store
93

 
25,905

 
25,758

 
 
Redevelopment/Development
13

 
6,294

 
6,283

 
 
Acquisitions
7

 
1,943

 
1,943

 
 
Other Real Estate
15

 
1,483

 
1,454

 
 
Held for Sale
2

 
782

 
782

 
Total Consolidated
130

 
36,407
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